Biodiesel allowance decree was awaited by market

Indonesia had actually prepared to launch greater biodiesel mix on Jan. 1

Palm oil standard contract increased 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while giving the market until completion of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had prepared to launch the necessary requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial regulation has been signed," the minister Bahlil told press reporters, adding the government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel producers and fuel retailers will be given up until Feb. 28 to adapt to the B40 mix. She stated the hold-up was because of technical challenges linked to subsidies for the fuel.

The non-implementation on Jan. 1. had resulted in a 2.6% drop in the Malaysian palm oil benchmark contract on Thursday. On Friday, it recuperated by around 1%.

Fuel retailers and biodiesel manufacturers had actually stated they were not able to draw up agreements for biodiesel circulation without the decree.

The biodiesel allowance for 2025 suggested an increase from 2024's estimated biodiesel intake of 12.98 KL, ministry data revealed on Friday.

Of the overall allocation for this year, 7.55 million KL is for the general public service responsibility (PSO), which covers sectors such as public transport, whose sales will be subsidised by the nation's palm oil fund.

"The remaining allocations will be cost market value. The non-PSO allocation is set at 8.07 million KL," Bahlil said, adding the fund could not subsidise the rate gap between the palm oil and nonrenewable fuel sources for the total allocation.

BPDPKS, the company in charge of gathering and managing the palm oil funds, estimated in November B40 would need a 68% subsidy increase.

To help finance that, Indonesia plans to increase its export levy for unrefined palm oil (CPO) to 10% from the present 7.5%, however for that to take place, another main policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati